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alex reese, Attorney

Category: Legal

Satisfied Customers: 3151

Experience: BS, MS, JD

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Is a verbal contract legally binding in an employment situation?

Resolved Question:

Is a verbal contract legally binding in an employment situation? I'm a 1099 insurance broker and have left my agency. Our "contract" is not go after each others accounts and/or to violate trade secrets. My former agency owner gave me a contract to sign spelling this out, but there were other terms that we never agreed to. I did not sign it as such and now he's violating our agreement and the agency's practice. Can I equally go after his accounts and divulge trade secrets of the agency?

in most situations, verbal contracts can be binding if the surrounding facts indicate that the essential elements of contract formation were satisfied

alex reese :

normally there must be "consideration" to have a valid contract, but here the consideration can be the exchange of promises. however, if his promise not to compete was conditioned on the acceptance of the terms in the contract he gave you then arguably there was no agreement.

alex reese :

...because you rejected those terms. However, contracts aside, you do not need a contract you prevent someone from using your trade secret information to unfairly compete or gain an undue advantage....but there is a lot of gray area as to who is the owner of these trade secrets upon your departure. You may have to look at any employment terms you had as part of your 1099....because I doubt they would allow a 1099 employee (or any other type of employee) to retain or use trade secret info upon departure from the organization.

Customer:

There was over $1,000,000 in consideration over a 6 year period. We both came from an agency where you owned your book of business and as such all information is considered a trade secret. I also know of his accounts from working with him for 18 years.

alex reese :

I see.

Customer:

It's acknowledged in this agency that all producer/brokers OWN their clients, client info and the right to retain those clients when they leave

alex reese :

If the information is considered trade secret of the individual, then that woudl be critical to this issue

Customer:

EVERY producer in the agency understands these facts

Customer:

Do you have actual experience in contract law related to employment matters?

alex reese :

I have dealt with the IP issues, some relating to employment but not specifically employment. However, the particular agreement you had is most important. From what you have said this would be an exception to the typical scenario....generally companies do not all employees of any kind to retain trade secrets. So you are saying that you both know each others "trade secrets" and that he is using yours and you "could" use his...?

alex reese :

"do not allow employees"

alex reese :

If he is your former employer, I would be very hesitant to use these trade secrets because I don't think you would be on an equal footing

alex reese :

without something in writing that essentially states that you can use the information, because the default rule is that the employer would own all IP and trade secrets arising in the course of your employment.

alex reese :

Now, if you have a verbal agreement APART from the written contract that you rejected, then that could certainly be binding as long as you both exchanged promises

alex reese :

That is key because the verbal agreement could supercede any existing agreements/conditions

alex reese :

however, if the verbal agreements were just part of the preparation/negotiation of the agreement that was in writing and was rejected by you, then I would not count on that verbal agreement as it will be hard to enforce since he can cite to the written agreement that was rejected as evidence there was no agreement

I will tell you that...the things you have to go through to be an Expert are quite rigorous.

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